Spot market less profitable

Concordia Maritime AB says long-term charters are a more successful strategy than the spot market for owners.

Concordia Maritime AB says long-term charters are a more successful strategy than the spot market for owners.

Swedish tanker operator Concordia Maritime AB says long-term charters are a more successful strategy than the spot market for owners. The Oslo-listed company posted a profit after tax for 2008 of $69.2 million (SEK 95.8 million), up some 33% from the $51.9 million (SEK 62.9 million) it earned in the previous year. ?The fact that we posted a good profit, despite the current market situation, is a consequence of our strategy to sign our vessels to long contracts,? said the Gothenburg-based owner.

?We have a fleet that is generating stable revenues, which are higher than the freight rates on the spot market."

Looking ahead, Concordia warned that the large number of vessels under construction for delivery in 2009 and 2010 could exacerbate the effect of the current economic slowdown which is already pressuring freight rates.

It said however, that ?a prolonged weak market in combination with a poorly functioning credit market could, paradoxically, have a positive effect on the balance between supply and demand.?

According to Concordia, shipping companies with poor cash flows or little access to financing could find themselves facing acute problems.

?This, in turn, could lead to delayed deliveries or even annulled orders resulting in a more balanced growth of the fleet.?

In the longer term, the company is expecting continued ?large demand for safe transportation of oil as a consequence of rising energy requirements and the comprehensive utilization of oil and petroleum products.?

The company has a newbuilding program comprising 10 tankers, which are being built in accordance with the MAX concept.

Six of these tankers have been delivered. These vessels, P-MAX, are product tankers of about 65,200 dwt.

The MAX concept means that the vessels are designed for maximum loading capacity in shallow waters.

Aside from these ten newbuildings Concordia's fleet includes two other panamaxes on ten-year contracts to Neste and two V-MAX VLCCs time-chartered till end 2010.